Quebecor to buy Freedom Mobile for $2.85 billion, expanding wireless business across Canada

Quebecor to be the fourth big telecom player? Will Quebecor's proposed purchase of Freedom Mobile make it the fourth major cell phone carrier in Canada? The answer is a solid maybe.

The Competition Bureau has strengthened its opposition to Rogers Communications Inc.'s proposed $26 billion takeover of Shaw Communications in new submissions to the Competition Tribunal ahead of weeks of hearings this fall.

At the same time, Rogers, Shaw Communications and Quebecor announced in a news release issued Friday evening an agreement to sell Freedom Mobile to Quebecor, subject to regulatory approval (the Freedom Transaction).

"Under the terms of the agreement, Quebecor has agreed to purchase Freedom, on a cash basis, on an unleveraged basis, for an enterprise value of $2.85 billion," the release stated.

This agreement would expand Quebecor's wireless operations across Canada.

The agreement includes the transfer of all Freedom branded wireless and Internet customers, as well as its owned retail outlets. In the long term, Shaw and Rogers want to provide Quebecor with data and roaming services.

"This is a pivotal moment for the Canadian wireless market. Videotron, a subsidiary of Québecor, is the fourth strong player that, with Freedom's solid foundation in Ontario and Western Canada, will be able to deliver tangible benefits to all Canadians," said Quebecor president and CEO Pierre Karl Péladeau in a news release.

Rogers CEO Tony Staffieri seems confident that the agreement will maintain healthy competition.

"This negotiated agreement between proven cable and wireless companies will ensure that a highly competitive marketplace is maintained through substantial future investment in Canada's world-class networks," he said, adding that he is "excited about obtaining pending regulatory approvals to complete our merger with Shaw."

The Freedom transaction is conditional on, among other things, Competition Bureau clearance under the Competition Act and approval from the Ministry of Innovation, Science and Industry, and would be completed at virtually the same time as the closing of the Rogers-Shaw transaction, if it is cleared.

Regarding the latter transaction, in legal documents released after the markets closed, the Competition Bureau disputed Rogers' efficiency claims and said the acquisition of its closest competitor is anti-competitive and will hurt consumers through higher prices, inferior service and lost innovation.

The agency also argues that the proposed sales of Shaw Communications' Freedom Mobile service are "not an effective remedy" because they will not replace the growing competition that Shaw Mobile would offer in Alberta and British Columbia and would make Freedom Mobile "a weaker competitor down the road" than it would have been without the deal.

The office said the efficiencies that Rogers claims will be created by the agreement are insufficient to offset the anti-competitive effects and are "speculative, unproven and unlikely to be achieved ... or are grossly exaggerated."

It says the claimed efficiencies are based on "unrealistic assumptions and flawed methodologies."

The Competition Bureau also said that further price increases would result in the transfer of wealth from low- and middle-income groups to shareholders, including ultra-rich members of corporate family ownership groups.

Five weeks of hearings are scheduled to begin the week of November 7, followed by written and oral arguments.

-- This report by The Canadian Press was first published in French on June 18, 2022.